the way to profit with pin bar trading strategy

The pin bar trading strategy is a trending price action method of technical analysis that focuses on analyzing candlestick charts for potential entry signals. When seen at certain levels, a pin bar provides an effective signal for traders to take advantage of possible market moves.

Sometimes candlestick charts or patterns can provide good entry signals when they are located at certain levels.

The pin bar is one of the most reliable and well-known candlestick patterns, and when traders see it on the chart, the price is likely to change direction immediately.

If you know how to recognize these patterns and use them, they can be an excellent tool for making trading decisions.

What are pin bars?

A pin bar is a type of candlestick that signals a price reversal. It consists of a long shadow, a small shadow, and a body in between. Interesting fact: the name of this pattern is short for Pinocchio (pin), because it has a long axis similar to Pinocchio's nose.

However, apart from long shadows, there are also special market conditions for a pattern to be called a pin bar.

In the image above, you can see two types of pin bars: bearish and bullish.

bearish pin bar forms after a solid move up or at the end of an uptrend. The body is smaller than the body of the previous bullish candle. This pattern has a long upper tail, which can be three or more times its body size. This pattern can be a bearish or bullish candle, but bearish is believed to give a stronger signal. This pattern should be confirmed by a bearish candle that opened below the body of the bearish pin bar. This signal indicates that buyers tried to push the price up, but their attempts failed.

bullish pin bar appears at the end of a down move or downtrend. This pattern opens within the body of the previous bearish candle and has a long lower tail and small body. This pattern should be confirmed by a bullish candlestick that opened above the closing price of a bullish pin bar.

Now that you know the main points of this strategy, let's take a look at the setup.

Strategy setting

Instruments: Major currency pairs with tight spreads and high liquidity, available on standard accounts or ECN accounts. Considering we are talking about scalping strategy, we should pay attention to this detail. Time range: M15 or M30. Technical settings: key levels, trend lines, pin bar formations.

Sell position entry rules

Mark key levels and identify trend lines. When the pin bar forms at an important resistance level, place a “Sell” order 10-20 points below the pin bar's lower level. Place a Stop Loss 20-30 points above the resistance line that has rejected the price. Place Take Profit with a 1:2 or 1:3 risk-profit ratio, or close the order at a significant support level.

Example 

The chart above shows that EURUSD is trying to climb higher after hitting the local trend line within the M15 timeframe. However, buyers were unable to hold positions for a long time. Therefore, a pin bar is formed. After confirming, we placed a sell order below the pin bar's bottom level at 1.03497 and Stop Loss above the latest resistance line at 1.03598. Place the Take Profit level at 1.03194. The result, recorded a profit of 302 points.

Buy position entry rules

Mark key levels and identify trend lines. When the pin bar forms at an important support level, place a “Buy” order 10-20 points above the top level of the pin bar. Place a Stop Loss 20-30 points below the support line that has rejected the price. Place Take Profit with a risk-profit ratio of 1:2 or 1:3, or close the order at a significant resistance level.

Example

On the EURUSD chart, we are trying a buy scenario. After the price dropped below the psychological 1.2000 level and tested the area near the 1.1900 support zone, a pin bar pattern formed. We opened a buy order above the pin bar's upper level at 1.20058 and placed a Stop Loss at 1.19870. With a 1:3 risk-profit ratio, we set Take Profit at 1.20619. With